From the mid-1970s the late 1990s, Ouzinkie Native Corporation’s major investments were concentrated in timber and securities (stocks and bonds). Timber volumes and prices began a slide in the late 1990s and securities went through a major downturn from 2000 to 2002. Due to the severity of the decline in the timber markets, Koncor Forest Products Company, 65% owned by ONC, shut down logging and marketing operations. In addition, ONC experienced losses on securities between 2000 and 2002. The company’s goal is to reduce its’ reliance on timber and securities and invest in opportunities providing more stable sources of income.

Sawmills in Japan used to account for 85% of timber sales, but no sales are anticipated to that market in 2007. Nearly all Afognak logs being sold today are to sawmills in South Korea. Although there have been a few shipments of Afognak logs to sawmills in China in recent years, there are still regulatory barriers by the Chinese government impeding a near-term expansion of sales to this market. The company will continue selling timber as long as profits are reasonable, but will do so on a “stumpage basis,” i.e., timber is sold at a fixed price per thousand board feet to a buyer who assumes the marketplace risks.

Although the company’s securities portfolio rose 41% in value in 2003 (rising up from deep bear market lows), returns in 2004 were 9.72% and returns in 2005 were 4.97%. The 2004 and 2005 returns do not meet the company’s 15% minimum return criteria. However, securities are very “liquid” assets and are a source of investment cash readily available to the company when opportunities arise. Also because of their liquidity, the company will continue keeping investments in securities to maintain its’ high level of creditworthiness.

Investments in recreation are somewhat “recession proof,” as people continue to participate in sports and recreation activities during economic downturns. The company has invested in facilities that offer hockey, indoor soccer, court sports(volleyball), sports fishing/bear viewing lodge and remote rental cabins. It has also invested in a developer of casinos for Indian Tribes. These businesses are profitable and provide income to the company.

Although real estate usually represents illiquid investments, returns are often above the company’s 15% criteria, due to leverage provided by financing. Currently the company’s real estate investments in South Anchorage include the 65,000 sq. ft. Subway Sports Centre (71% ownership), the 44,000 sq. ft. CellularOne Sports Center (62% ownership) and the 15,000 sq. ft. Platinum Building (70% ownership). In addition to profit distributions received by the company from these investments, their real estate values continue to rise due to a strong economy in South Central Alaska and much higher replacement cost of building materials caused by hurricane Katrina and growing demand for building materials worldwide, particularly from China.

In Wasilla, the company has 25% ownership of a 12.68 acre commercial parcel fronting Knik-Goose Bay Road near the Parks Highway. There are no definite plans for the property at this time. It may be sold, or developed for a build-to-suit lease to a tenant.

The company has a 50% ownership in 28 subdivided lots fronting the Kenai River adjacent to the Kenai Landings, which was an old cannery re-developed for tourism and commercial fishing purposes. The lots are offered for sale to individuals wanting to build summer homes at the location.

Currently, the company’s “lower 48” real estate investments including the development of 2 new office buildings (4% ownership) totaling 105,000 sq. ft. at San Juan Capistrano, California, which will be completed by October 2006, the development of a 59,600 sq. ft. multi-use building (5% ownership) in Chandler, Arizona, which is expected to be complete by the end of 2007, and the development of a 108,095 office building (5% ownership), also in Chandler, AZ, and expected to be complete in mid-2008. All of these investments have been made with long-time developer Mammoth Equities. The company had a 9% ownership interest in a 41,000 sq. ft. office building at Roseville, California, also developed by Mammoth Equities, which was sold in March 2006.

The company will continue making real estate investments as opportunities arise, particularly with Mammoth Equities, which does not require investors to guarantee loans used to finance properties. Also, the company earns superior returns investing in properties with Mammoth Equities and avoids over-concentration in geographic markets.

In May 2005, the company purchased 51% ownership of International Logistics Support Corporation (ILSC) of Payson, AZ. ILSC repairs flight data recorders and bubble memories. In mid 2006 through its’ newly created Defense Training Services (DTS) division, ILSC began providing simulated middle-eastern warfare training under contract to the U.S. military.

At the end of 2006, Kodiak Kenai Cable Company (KKCC) “lit up” its’ newly installed fiber optic cable system connecting Kodiak Island to the mainland of Alaska. The company is a 10% owner of this business. KKCC is a telecom “carriers’ carrier.” Carriers such as GCI lease capacity on KKCC’s system and provide the capacity to their commercial and residential customers.

The company has an investment in Southern Iowa Bio-Energy, which will be building a 30 million gallon per year capacity plant to make bio-diesel primarily from soy bean oil. The EPA mandated that the sulfur content in conventional diesel be reduced dramatically to reduce noxious emissions. However, sulfur provides the lubrication needed in diesel engines. Bio-diesel, when blended with conventional diesel, replaces the lubrication from sulfur.

For questions/comments/problems with the website contact kevin@ouzinkienativecorporation.com